Intuitive Surgical (ISRG): Stock Set to Top Q1 Earnings?

We expect Intuitive Surgical Inc. ISRG to beat expectations when it reports first-quarter 2016 results on Apr 19.
    
Why a Likely Positive Surprise?

Our proven model shows that Intuitive Surgical is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Intuitive Surgical’s Earnings ESP stands at +0.29%. This is because the company’s Most Accurate estimate is $3.47, whereas the Zacks Consensus Estimate is pegged at $3.46. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise.  

Zacks Rank: Intuitive Surgical currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Intuitive Surgical’s Zacks Rank #3 and +0.29% ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

We believe that the growing adoption of the Da Vinci system among physicians for general surgery (hernia repair, colorectal) procedures is a key catalyst. Increasing procedural volumes outside the U.S. present significant growth opportunity for the company.

Recent studies have also shown that the robot-assisted surgery system had better outcomes and fewer complications compared to conventional systems.

Moreover, back-to-back approvals from the FDA enhance the capabilities of the system. In January, Integrated Table Motion for the da Vinci Xi Surgical System was approved. Integrated Table Motion incorporates Intuitive Surgical’s da Vinci Xi and Trumpf Medical’s TruSystem 7000dV.

While da Vinci Xi is a robotic aided surgical system, TruSystem 7000dV is a sophisticated operating table. The combination is expected to help surgeons and anesthesiologists make essential table adjustments in order to execute surgeries in an efficient manner.

The FDA also approved da Vinci Xi EndoWrist Stapler 30 (30mm) instruments and reloads. The Stapler 30 Curved-Tip instrument can be used for General Surgery, Thoracic, Gynecologic and Urologic surgery. The new product assists the surgical procedures by allowing superior placement and visualization around tenuous vasculature.

Further, da Vinci Xi Single-Site instruments and accessories received approval from the FDA. The Single-Site technology helps surgeons operate through a single incision in the patient’s umbilicus during cholecystectomy, benign hysterectomy and salpingo-oophorectomy procedures. This in turn will lead to an almost scar-less surgery.

Apart from the growing adoption rate and expanding portfolio, suspension of medical device tax will boost gross margin at least in the near term.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Align Technology Inc. ALGN, earnings ESP of +12.82% and a Zacks Rank #1.

Inogen Inc INGN, earnings ESP of +9.09% and a Zacks Rank #2.

Zimmer Biomet Holdings ZBH, earnings ESP of +2.07% and a Zacks Rank #2.

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